Tiger Brands Limi T e d a n n u a L r e A n n u A l R e p o R t 2 0 1 0 p o r T 2 0 1 0 Telephone: 011 840 4000 Facsimile: 011 514 0477 physical address: Tiger Brands Limited, 3010 William Nicol Drive, Bryanston postal address: PO Box 78056, Sandton, 2146, South Africa Website: www.tigerbrands.com Listed on the JSE Limited, Tiger Brands Limited is a branded fast-moving consumer packaged goods company that operates mainly in South Africa and selected emerging markets. www.tigerbrands.com Group at a glance Annual financial statements Our vision, mission and values 2 Responsibility for annual financial statements 96 Our strategy 3 Independent auditors’ report 97 Group highlights 5 Directors’ approval 98 Group structure 6 Certificate by company secretary 98 Five-year review 8 Statutory information 99 Definitions 9 Effects of changing prices 101 Summary of ratios and statistics 10 Income statements 102 Value added statement 11 Statements of other comprehensive Segment report 12 income 103 Statements of financial position 104 Group review Cash flow statements 105 Chairman’s letter to shareholders 14 Notes to the cash flow statements 106 Directorate 18 Statements of changes in equity 108 Executive management committee 21 Notes to the financial statements 111 Chief Executive Officer’s review 22 Accounting policies 111 Group financial review 28 Annexure A 184 Annexure B 185 Divisional reviews Annexure C 185 Domestic Food 34 Analysis of ordinary shareholders 186 Home and Personal Care (HPC) 38 Shareholders’ diary 191 Administration 192 Exports and International 42 Governance and sustainability • Notice of annual general meeting, see separate Corporate governance 46 document enclosed with this report Remuneration report 56 Management reporting 73 Sustainability report 74 Tiger Brands Annual Report 2010 01 Group at a glance Group review ▲ Our vision, mission and values Vision To be the most admired branded FMCG company in emerging markets What our vision means to us • Sustainability Tiger Brands is a branded Fast Moving Consumer • People retention and development Goods (FMCG) company with a broad portfolio • Transformation of leading food, beverage, personal care and We have a track record of developing, home care brands that add value to consumers’, acquiring and growing iconic brands through shoppers’ and customers’ lives and to the broader brand building and innovation, and so satisfying communities in which we operate. The successful a range of consumer, shopper and customer performance of the business also enhances the needs. We have traditionally focused on the lives of our other important stakeholders – i.e. our South African market and provided consistently staff, our business partners, our investors and the superior returns for our investors. countries in which we operate. We are making progress in expanding the Underpinning our vision, we strive to meet the footprint of the business and becoming a performance delivery criteria we have identified recognised ‘multi-country, local player’ in in the following areas: selected emerging markets, through our strategy • Financial performance of selective acquisition and growing our • Customer delivery FMCG brands that are desired by the majority • Leading brands of consumers. Mission To deliver revenue growth that is 3% greater than South Africa’s GDP growth plus inflation; and achieve an operating margin of 15%, thereby generating real earnings growth and a return on investment which exceeds the company’s cost of capital. Values We live by the values we have defined and which guide our every-day behaviour: • Our consumers are our business • We act with integrity in everything we do • We have a passion for excellence • We value our people and treat them with dignity • We continue to reinvest in our society 02 Tiger Brands Annual Report 2010 Divisional reviews Governance and sustainability Annual financial statements Our strategy Key strategic thrusts • Drive South African volume growth to maintain and grow market shares and expand into adjacent markets • Step change expansion in emerging markets to accelerate growth • Brand building and innovation in core categories to protect number one and two category positions • Transform “go to market” model for increased market penetration • Deliver efficiency gains to enable reinvestment in volume growth Tiger Brands priority zones It is our aim to expand existing geographic and category platforms to leverage our competencies and drive merger and acquisitive growth in Africa and continue to evaluate opportunities with our partners in Latin America. Peru Benin Ghana Nigeria Ethiopia Ivory Coast Cameroon Uganda Chile Democratic Kenya Gabon Republic of Congo South Africa Tanzania African zones of priority Argentina Angola Zambia Mozambique Namibia Zimbabwe Botswana Swaziland Lesotho International zones of priority South Africa Tiger Brands Annual Report 2010 03 Group at a glance Group review ▲ Our strategy continued Key strategic thrusts expanded Drive South African volume growth to maintain and grow market shares In order to underpin and expand into adjacent markets performance delivery, • Identify step-change volume opportunities the corporate strategy • Prioritise FMCG business portfolio has been cascaded • Invest in differentiated brands • Balance volume growth, profitability and investment returns in core into functional strategies categories for human resources, • Drive an appropriate South African mergers and acquisition agenda marketing, supply • Innovate into adjacent markets chain, customer and • Leverage “full value price propositions” with “value-conscious consumers” sustainability. The and grow sales realisations vision, mission and Step-change expansion in emerging markets to accelerate growth strategic thrusts of these • Prioritise investments functional areas have • Expand existing geographic and category platforms to leverage been aligned to ensure Tiger Brands’ competencies seamless execution • Drive mergers and acquisition growth in Africa and continue to of the corporate evaluate opportunities with our partners in Latin America strategy. • Apply appropriate business models to unlock growth, including brownfield acquisitions, joint ventures and greenfield opportunities. Brand building and innovation in core categories to protect number one and two category positions • Define our innovation and brand building objectives and actions • Identify and drive research and development capability and support • Define marketing, trade and commercialisation post-launch support • Balance selling prices and EBIT margins with reinvestment in brand equity and volume growth • Drive and apply consumer and shopper insights Transform “go to market” model for increased market penetration • Grow in key channels by improving availability and rate of sale of core product lines • Collaborate with key customers around specific category opportunities and shopper insights • Commercialise branded propositions with superior activation Deliver efficiency gains to enable reinvestment in volume growth • Drive horizontal efficiency gains to reduce costs • Leverage and adapt existing business models • Collaborate beneficially with suppliers 04 Tiger Brands Annual Report 2010 Divisional reviews Governance and sustainability Annual financial statements Group highlights R19,3 billion R2,6 billion Turnover from FMCG continuing operations Cash available from operations (excluding Oceana fishing) down 2% up 35% 2009: R19,7 billion 2009: R1,9 billion per share 746 cents R3,0 billion Total dividend and capital distributions Operating income from continuing operations for the year up 6% per share (excluding Oceana fishing) down 1% 2009: 704 cents per share 2009: R3,1 billion Headline earnings per share excluding once-off empowerment costs up 6% Domestic Food • The Grains, Beverages and Value Added Meat Products categories achieved pleasing performances • The Groceries and Snacks & Treats categories were challenged in a difficult trading environment Home and Personal Care • Soft market conditions, a poor pest season and business integration challenges in Personal Care led to a decline in operating profit Exports and International • Deciduous fruit exports reflected a R203 million reversal in operating profit from 2009 • Export performance into Africa exceeded expectations Associates • Oceana headline earnings per share increased by 13% • Good earnings growth achieved by Carozzi was partially offset by Rand strength Tiger Brands Annual Report 2010 05 Group at a glance Group review ▲ Group structure domestic food Home and personal care (Hpc) Business description The Domestic Food division is a The HPC division is a leading leading manufacturer, distributor manufacturer, distributor and and marketer of food and beverage marketer of personal care, brands. babycare and homecare brands. 2010 2010 Rm Rm Contribution Turnover 15 715,0 Turnover 1 786,7 Operating income 2 681,1 Operating income 459,3 Operating margin (%) 17,1 Operating margin (%) 25,7 Grains: Ace, Albany, Aunt Caroline, Personal Care: Gill, Ingram’s Golden Cloud, Jungle, King Korn, Camphor Cream, Dolly Varden, Kair, Morvite, Tastic Lemon Lite, Perfect Touch, Protein Feed Groceries: All Gold, Black Cat, Colmans, Crosse & Blackwell, Babycare: Elizabeth Anne’s, Purity Fatti’s & Moni’s, KOO Homecare: Airoma, Bio-Classic, Snacks & Treats: Anytime, Beacon, Doom, FastKill, ICU, Jeyes, Peaceful Brand offering Black Cat, Inside Story, Jelly Tots, Sleep, Rattex Maynards, Smoothies, Wilsons, Wonderbar Beverages: Energade,